Goal Setting involves establishing specific, measurable and time targeted objectives. Work on the theory of goal-setting suggests that it's an effective tool for making progress by ensuring that participants are clearly aware of what is expected from them, if an objective is to be achieved. On a personal level, setting goals is a process that allows people to specify then work towards their own objectives - most commonly with financial or career-based goals. Goal setting is a major component of Personal development literature.

To be most effective goals should be tangible, specific, realistic and have a time targeted for completion. There must be realistic plans to achieve the intended goal. For example, setting a goal to go to Mars on a shoe string budget is not a realistic goal while setting a goal to go to Hawaii as a backpacker is a possible goal with possible, realistic plans.

Goal setting also requires motivation. You need to understand why you want the goal. In the motivation film "The Opus" released in 2008, achievement expert, Douglas Vermeeren, explains this important principle clearly, "When people talk of clarity it often gets described as just writing down your goals. The most important element is often left out. That is finding your motivation. If you want to get to your goals quickly you have got to clarity on why you want it. What does it mean to you? Why do you need it in your life? And the stronger and more important the why - the more power you will have to pursue that goal. "

In the same film, Dr. Brandon Leach, a professor of psychology at Northwestern University, cites that even if someone is largely self-motivated they still must have the necessary skill set to reach the goal they have set. Said Leach, "In my mind, it is completely preposterous to say that motivation is always the most important intangible to possess if one wants to reach a goal of theirs. It's absurd. For example, if some young child sets to be a wizard or witch and is incredibly motivated to do, it's pretty obvious to conclude that he's going to need more than this, oh so important, motivation and seven volumes of Harry Potter."

Some people feel that one possible drawback of goal setting is that implicit learning may be inhibited. This is because goal setting may encourage simple focus on an outcome without openness to exploration, understanding or growth. [How to reference and link to summary or text] "Goals provide a sense of direction and purpose" (Goldstein, 1993, p.96). Locke et al. (1981) examined the behavioral effects of goal-setting, concluding that 90% of laboratory and field studies involving specific and challenging goals led to higher performance than easy or no goals.

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The first empirical studies were performed by Cecil Alec Mace in 1935.[1]Edwin A. Locke began to examine goal setting in the mid-1960s and continued researching goal setting for thirty years. Locke derived the idea for goal-setting from Aristotle’s form of final causality. Aristotle speculated that purpose can cause action; thus, Locke began researching the impact goals have on individual activity of its time performance.

The business technique of Management by objectives uses the principle of goal setting. In business, goal setting has the advantages of encouraging participants to put in substantial effort; and, because every member is aware of what is expected of.... him or her (high role perception), little room is left for inadequate effort going unnoticed.

While some managers would believe it is sufficient to urge employees to ‘do their best’, Locke and Latham have a clear contradicting view on this. The authors state that people who are told to ‘do their best’ will not do so. ‘Doing your best’ has no external referent which implies that it is useless in eliciting specific behavior. To elicit some specific form of behavior from others, it is important that this person has a clear view of what is expected from him/her. A goal is thereby of vital importance because it facilitates an individual in focusing their efforts in a specified direction. In other words; goals canalize behavior (Cummings & Worley p. 368). However when goals are established at a management level and thereafter solely laid down, employee motivation with regard to achieving these goals is rather suppressed (Locke & Latham, 2002 p.705). In order to increase motivation the employees not only need to be allowed to participate in the goal setting process but the goals have to be challenging as well (Cummings & Worley p. 369).

Managers can not be constantly able to drive motivation and keep track of an employee’s work on a continuous basis. Goals are therefore an important tool for managers since goals have the ability to function as a self-regulatory mechanism that acquires an employee a certain amount of guidance [2] have distilled four mechanisms through which goal setting is able to affect individual performance:

Goals affect persistence; constraints with regard to resources will affect work pace.

Goals activate cognitive knowledge and strategies which allows employees to cope with the situation at hand.

Through an understanding of the effect of goal setting on individual performance organizations are able to use goal setting to benefit organizational performance. [3] have therefore indicated three moderators which indicate the success of goal setting:

Goal commitment

People will perform better when they are committed to achieve certain goals. Goal commitment is dependent of:

The importance of the expected outcomes of goal attainment and;

Self-efficacy - one's belief that they are able to achieve the goals;

Commitment to others - promises or engagements to others can strongly improve commitment

Feedback

Keep track of performance to allow employees to see how effective they have been in attaining the goals. Without proper feedback channels it is impossible to adapt or adjust to the required behavior.

Task complexity

More difficult goals require more cognitive strategies and well developed skills. The more difficult the tasks ahead, a smaller group of people will possess the necessary skills and strategies. From an organizational perspective it is thereby more difficult to successfully attain more difficult goals since resources become more scarce.

Employee motivation

The more employees are motivated, the more they are stimulated and interested in accepting goals.

Macro-economical characteristics

The position of the economy in the conjucture puts pressure or simply relieves the organization. This means that some goals are easier set in specific macro-economical surroundings. Depression is for instance the least successful conjucturial phase for goal setting.

These success factors are not to be seen independently. For example the expected outcomes of goals are positively influenced when employees are involved in the goal setting process. Not only does participation increase commitment in attaining the goals that are set, participation influences self-efficacy as well. In addition to this feedback is necessary to monitor ones progress. When this is left aside, an employee might (s)he is not making enough progress. This can reduce self-efficacy and thereby harm the performance outcomes in the long run [4].